Facts not Fiat

Today, AT&T filed its response to a July 27 Notice of Apparent Liability (NAL) issued by the FCC for alleged violations of the lowest corresponding price (LCP) requirements of the E-rate program. These rules say that in order to participate in the E-rate program, a carrier must charge a participating school, library or consortium no higher than the lowest price that it charges to any similarly situated non-residential customer for similar services. To be clear, we wholeheartedly support the E-rate goals of providing schools and libraries with affordable broadband and telecommunications services. The Bureau’s arguments, however, that we applied the LCP rule incorrectly are factually wrong, they deviate from the FCC’s own rules and existing precedent, and they continue the Enforcement Bureau’s troubling pattern of “rulemaking through enforcement.”

The facts of the case aptly demonstrate that no actual FCC rules were violated. First, the Bureau alleges that AT&T should have provided two school districts rates based on one-year contracts despite the fact that the schools were buying services on a month-to-month basis. Contract term is a regular and routine distinction in rates, and the Commission has previously expressed the view that length of contract is a valid basis to price services differently among customers. In this case the school districts at issue never asked for annual contracts, never signed annual contracts and did not behave as though they had annual contracts.

Second, the Bureau contends that AT&T should have provided these districts rates for services as if they were purchased through the State of Florida’s E-rate consortium. The consortium is able to win a lower rate by, among other things, combining the purchasing power of multiple state agencies, and state-operated organizations, including schools and libraries. In the FCC’s own words, participation in consortiums enable eligible schools and libraries to obtain “terms and conditions better than they could negotiate alone.” But these school districts specifically chose not to purchase through the consortium preferring instead more flexible month to month service contracts.

The NAL also contends that AT&T must provide LCP rates for services purchased outside the E-rate Form 470 competitive bidding program. The NAL takes the extreme position that the LCP obligation attaches regardless of whether service is provided pursuant to a Form 470. That view has never before been articulated in any FCC rule or order. And it is fundamentally at odds with the structure of the E-rate program, which has always emphasized the essential nature of competitive bidding by requiring applicants to post 470s, and allowing carriers the freedom to choose whether to bid. In fact, the service provider community requested confirmation of this interpretation in a Petition filed over six years ago, which was never addressed by the Commission.

Finally, the NAL fails to meet basic procedural criteria such as complying with the relevant statute of limitations (which is expired) or acknowledging that adjudication of LCP-related disputes regarding intrastate services is not within the FCC’s jurisdiction (the states have this one).

Sadly, we are seeing rulemaking via Enforcement Bureau fiat far too often. For example, the Bureau tried to establish a new class of protected information called “CPI” (customer proprietary information) via enforcement for a data breach – this despite the fact that this class of information had not appeared in the prior 16 years of FCC orders on “CPNI” (customer proprietary network information). The FCC only recently issued a proposed rulemaking to define CPI (and only in the broadband context) – a year and a half after they issued the first enforcement action.

And recall the NAL issued against AT&T alleging a violation of the 2010 Open Internet rules regarding transparency. In that case, the Bureau disavowed the Commission’s own prior statements in order to find a legal theory on which it could frame a theory of liability. AT&T’s response detailed how the NAL was contrary to the most basic principles of fairness, due process and responsible enforcement.

The LCP NAL should have never been issued and as our response today demonstrates there is no legal or factual basis for liability against AT&T.

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